Debate over the fate of the Labor Department's fiduciary rule, questions about the SEC's new liquidity risk management rules and concerns regarding increased civil litigation against fund administrators - all pressing industry issues framing the discussion at the Investment Company Institute's annual Mutual Fund and Investment conference in Palm Desert, California.

Gaining real perspective on the current political climate and its implications for the fund industry is a key topic of interest for attendees, given the Trump administration's stated goal of rolling back financial regulations.

"I am hoping to discuss the impact of possible deregulation within the industry, and am interested in hearing a discussion around the current administration and what they will be able to execute on," says Stephanie Miller, Senior Vice President of SS&C's fund administration business.

The conference aims to provide perspective on the latest regulatory and legislative initiatives facing the mutual fund industry, says ICI spokeswoman Rachel McTague.

"The new environment in Washington will certainly inform discussions at the event this year," she adds.

The DoL proposed delaying the applicability date of the fiduciary rule by 60 days in order to complete a review of the regulation ordered by President Trump.

"One panel that is likely to attract significant interest is 'Retirement Redux: Where Does Regulation Go from Here?' on which industry and retirement law experts will discuss the Department of Labor's fiduciary rule and the prospects for changes to the rule," McTague says.

SS&C's Miller agreed, noting staying on top of retirement investment regulation was her firm's top priority.

"We're keeping a close eye on changes to the DoL Fiduciary Rule and ERISA," she says.

SEC CHANGES

Among the event's keynote speakers is David W. Grim, director of the SEC's Division of Investment Management.

Acting SEC chair Michael Piwowar set the tone earlier in March for how the fiduciary rule is being viewed.

"I have a very nuanced view of the DoL fiduciary duty rule: I think it is a terrible, horrible, no-good, very bad rule," he said in remarks at the Investment Adviser Association's annual regulatory and compliance conference.

"For me that rule was never ever about investor protection. To me, that rule, it was about one thing and it was about enabling trial lawyers to increase profits."

Additionally, the SEC's enforcement division is expecting deep cuts under the new administration. Bloomberg News reports it has banned non-essential travel, imposed a hiring freeze and curbed the use of outside contractors who assist SEC lawyers with cases.

Despite focus on the fiduciary rule's fate, managers should not expect any drastic changes to regulations around mutual funds, says Rajib Chanda, a partner at New York-based law firm Simpson Thatcher & Bartlett.

"There's obviously some level of uncertainty as to the direction of regulations with new leadership in the administration," says Chanda, who will speak about the SEC's new reporting modernization rules at the conference.

"There's just not a lot of clarity as to what type of rulemaking we're likely to see, and where existing rules will eventually land, with some of the rules in the past year or so delayed.

"But in a lot of ways, the mutual fund industry is buffeted from wild regulatory swings," he says. "The regulation of mutual funds is in a large part by statute so you can't just change it overnight.

"Frankly, one of the biggest changes anticipated is there might be a different emphasis on enforcement from the SEC," he adds. "But mutual funds aren't the prime target for any procecutor."

MAKING BETS

Investors however have already made bets on how President Trump's deregulation efforts will fare.

According to Bloomberg News, a combined $2.4 billion has flowed this year into three bank-focused ETFs: State Street's Financial Select Sector SPDR fund (XLF), BlackRock's iShares U.S. Financials (IYF) and the Vanguard Financials (VFH).

Financials have been the best performing industry in the S&P 500 over the past 12 months, rising more than 42%.

Long-only equity mutual funds have also benefited from rallying U.S. equities, reporting net-positive weekly flows for the first time in nearly a year.

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